Does it pay to be environmentally/socially responsible? If so, under what conditions does it

pay?Clara Melot

Jennifer Steeves

Outline Definition of CSR

The case against CSR

The case for CSR Tangible vs intangible benefits

Short term vs long term

When does CSR pay? Opportunities for raising revenues

Opportunities for decreasing costs

Conclusion

Definition of CSR CSR = Corporate Social Responsibility

Activities that “represent firms’ efforts to do more to address a wide variety of social problems than they would have done in the course of their normal pursuit of profits” (Vogel, 2005:4)

Beyond the law

Accountability to stakeholders

Old vs. New CSR Doing good to do good vs. doing good to do

well (Vogel)

Zero-sum to win-win (Fiorino)

CSR sells, but does it pay?

The case against CSR Greenwash

Costly

Customers don’t really care

Socially responsible funds don’t outperform other funds

Bottom line?

Company’s main responsibility is to maximize profit for shareholders

CSR doesn’t guarantee payoff

The case for CSR Intuitively, CSR should not pay

Porter Hypothesis (applied to VEPs) allows us to draw a different conclusion.

Business as usual Good business relies on good practices

because trade is based on trust.

Part of CSR is achieved through efficient business

Tangible and intangible short term benefits

CSR activities and outcomes can pay

Why separate activities and outcomes?

tangible= accountancy view

intangible = economic benefits which can be tricky to value.

Tangible and intangible long term benefits

CSR activities can pay economically speaking. Through tangible and intangible benefits

(marketing assets)

…under certain conditions

Relationship between environmental and economic

performance

Lankoski, 2008

When does CSR pay?

Opportunities for raising revenues

Better access to certain markets

IF said firm sells to the public sector or is in a BtoB model.

United Kingdom:

Public procurement policy

Differentiating products IF there is :

- credible information about the product’s added value- Consumer Willingness To Pay- Barrier to imitation

Toyota was the first company to develop an accessible series model for hybrid technology

Selling pollution control technologies

More likely if the company already has R&D facilities.

Ciba Specialty Chemicals Co. And the Cibacron Ls Pattern

When does CSR Pay?

Opportunities for reducing costs

Risk management & stakeholder relations

IF firms are in highly regulated and publicly scrutinized industries

APP

Cost of materials, energy and services

IF firms: Have flexible production process Are in highly competitive industries Are in industries where MBIs were

implemented Already have R&D facilities

Dow Chemicals’Waste Reduction Always Pays (WRAP)

Cost of capital IF firms have shares exchanged on stock markets

Exxon Mobil’s share price drop after Exxon Valdez oil spill

Cost of labour IF:

Firm’s emissions affect workers’ health Firms seek to attract young, well-educated

employees Firms are located in areas with strong

environmental values

97% of MBAs willing to forgo average of 14% expected income to work for firm with better CSR reputation

Conclusion

CSR is not a panacea but a tool which is efficient under certain

conditions

Strategic implication What contextual elements should

business policy makers consider before implementing CSR strategies?

References Ambec, S. & Lanoie, P. (2008). Does it pay to be

green? A systematic overview. The Academy of Management Perspectives 22 (4), pp.45-62

Fiorino, D. J. (2006). The new environmental regulation. London: MIT Press.

Lankoski, L. (2007). Corporate responsibility activities and economic performance: A theory of why and how they are connected. Business Strategy and the Environment 17 (8), pp.536-547

Vogel, D. (2005). The market for virtue the potential and limits of corporate social responsibility. Brookings Institution, Washington, D.C.